Due to deteriorated results and margins, as well as increased payment delays and insolvencies our underwriting stance remains restrictive for the sector.

Polish GDP growth is expected to increase above 3% in 2017 and 2018, driven by robust consumer demand, rising business investment and increased investments linked to EU funding. This investment surge should help the Polish machinery sector, after some of the main subsectors suffered severely over the last two years.

The mining machines segment has been affected by the downturn in the Polish coal mining industry since 2012, leading to a sharp decrease in investments (down 45% in 2015). Additionaly, mining related companies increased average payment terms and often paid late. As a consequence, many mining machinery businesses have shown deteriorated financial results and strained liquidity, leading to more insolvencies in 2015 and 2016. However, a recent increase in coal prices has led to better payment behaviour by mining businesses, while at least larger mining machines producers were able to increase their exports, compensating for declining domestic sales.

EU subsidies helped to increase demand for agricultural machines until 2015. However, due to political issues affecting the payout of EU subsidies to farmers since the end of 2015, many agricultural businesses postponed purchases of agricultural machines (tractors, trailers), leading to a sharp decrease in machines sales. This triggered growing inventories and an increasing number of non-payment notifications in this segment. Should this sluggish demand continue, some agricultural machines distributors may face serious troubles.

Due to deteriorated results and margins, as well as increased payment delays and insolvencies our underwriting stance remains restrictive for the machinery sector, especially the mining and agriculture-related segments.We also pay special attention to export-driven businesses dependent on sales to Russia, as demand there remains weak and Russian authorities tend to prefer Russian-made goods in public tenders. It still remains to be seen if Polish machinery will benefit from the projected domestic GDP growth and investment increase in the coming years.